Bitwise CIO says Bitcoin could hit $1M in $38T store-of-value market

Chief Investment Officer at Bitwise Asset Management, Matt Hougan, said Bitcoin’s price could reach $1 million if it captures a sizable share of the $38 trillion global store-of-value market.

In a recent memo, Hougan said the market has expanded significantly over time, yet investors still assume the store-of-value market will remain static.

Matt Hougan says Bitcoin competes with Gold in the store-of-value market

Hougan explains that investors have always turned to gold to protect their wealth, and many now see Bitcoin as a suitable alternative because it is scarce, durable, and well-known worldwide. 

The CIO estimated that gold accounts for about $36 trillion of the $38 trillion store-of-value market, while Bitcoin holds about $1.4 trillion (less than 4% market share). From this point, Hougan says many analysts compare Bitcoin to gold because it also allows investors to store wealth outside of traditional financial systems and has a scarce supply of only 21 million coins.

But unlike Gold, Bitcoin exists digitally and can be broken down into extremely small units, allowing investors to move it quickly and easily across the internet.

Yet even with these qualities, people struggle to believe in $1 million per Bitcoin because it would take a miracle for the coin to capture more than half of the store-of-value market anytime in the near future. 

However, Hougan says the store-of-value market will not remain the same, as global wealth continues to expand and more people seek ways to protect their money. 

Bitcoin price could reach $1 million as more people use it to store wealth

In his memo, Matt Hougan said markets that preserve wealth can expand faster than investors expect, citing that gold’s total value rose from $2.5 trillion in 2004 to about $40 trillion today. This means the value compounded at 13% year after year as demand worldwide grew.

For the past two decades, investors have poured more money into store-of-value assets because government debt has increased in many parts of the world, wars have broken out, and central banks have introduced loose monetary policies that have kept interest rates low.

Hougan says the total market could reach $121 trillion over the next 10 years if the store-of-value market continues to expand at the same pace, and Bitcoin would need to capture only about 17% to reach $1 million. 

Hougan says investors will only accept that Bitcoin can move from its current 4% to 17% if they focus on how quickly adoption has increased in recent years.

More institutional investors have brought new money into Bitcoin over the past few years, and the coin’s long-term volatility has declined when compared to its initial years. 

Trends in portfolio allocation also reflect changing attitudes. For instance, in previous years, even a 1% allocation to Bitcoin by professional investors was viewed as aggressive. However, there is now an increasing trend of institutions allocating 5% to Bitcoin in diversified portfolios. Even a small increase in overall allocation levels can generate high demand.

Nevertheless, Hougan identifies some risks that may affect these predictions. First, the store-of-value market may not continue to rise at the pace it has over the last 20 years. Secondly, the economic factors that contributed to gold’s rise in value may not recur.

Another possibility is that Bitcoin may not reach the market share necessary to hit these price targets. Adoption may not be rapid enough, or investors may prefer traditional store-of-value assets like gold rather than traditional alternatives.

At the same time, however, Hougan also warns that these projections may not even be conservative enough. If there is growing concern about government debt or currency stability in the future, investors may require even higher returns from assets known to hold up well in the long run. Then, the growth of the global store-of-value market could accelerate even faster.

If such a scenario comes to pass, Bitcoin’s market share will exceed the expected 17% and its value will be further elevated. For Hougan, the important factor is not the price target but how the market’s framework changes with the possibility of further market growth.

In that context, Hougan explains that analysts who use a fixed market size to determine Bitcoin’s value may miss an important part of the picture. If the store-of-value market continues to grow and Bitcoin continues to increase its share of that market, it becomes clear how it is possible to reach $1 million per Bitcoin.